On June 6, 2002, the United States District Court for the Southern District of Florida entered a final judgment against Steven S. Gallers, the former controller and assistant treasurer of CyberGuard Corporation, in an accounting fraud case filed by the Securities and Exchange Commission in January 2002. Without admitting or denying the allegations of the Commission's complaint, Gallers consented to the entry of the final judgment, which permanently enjoins him from violating the securities antifraud, books-and-records, and internal controls provisions of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, bars him from acting as an officer or director of a publicly-traded company, and requires him to pay a $50,000 civil penalty.

The Commission's complaint, filed on January 30, 2002, alleged that Gallers and two others engaged in securities fraud and other violations while officers of CyberGuard, a Fort Lauderdale-based company in the business of developing and selling computer network security systems. According to the complaint, Gallers improperly recorded revenue from contingent transactions and accelerated revenue recognition on after-quarter shipments of CyberGuard products over seven fiscal quarters ended March 31, 1998, and knew, or was reckless in not knowing, that CyberGuard's financial results were materially misstated as a result. One of the other defendants - Robert L. Carberry, who was CyberGuard's former chairman, chief executive, and president - previously settled with the Commission. SeeLitigation Rel. No. 17346 (Jan. 30, 2002). The case against the remaining defendant - Patrick O. Wheeler, who was CyberGuard's former chief financial officer and vice president of North American sales, and is the company's current vice president of business development - is still pending.